Correlation Between Vanguard and BMO Global
Can any of the company-specific risk be diversified away by investing in both Vanguard and BMO Global at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard and BMO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and BMO Global High, you can compare the effects of market volatilities on Vanguard and BMO Global and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and BMO Global.
Diversification Opportunities for Vanguard and BMO Global
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and BMO is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and BMO Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global High and Vanguard is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard SP 500 are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global High has no effect on the direction of Vanguard i.e., Vanguard and BMO Global go up and down completely randomly.
Pair Corralation between Vanguard and BMO Global
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 1.4 times more return on investment than BMO Global. However, Vanguard is 1.4 times more volatile than BMO Global High. It trades about 0.15 of its potential returns per unit of risk. BMO Global High is currently generating about 0.14 per unit of risk. If you would invest 12,469 in Vanguard SP 500 on September 3, 2024 and sell it today you would earn a total of 2,567 from holding Vanguard SP 500 or generate 20.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. BMO Global High
Performance |
| Timeline |
| Vanguard SP 500 |
| BMO Global High |
Vanguard and BMO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and BMO Global
The main advantage of trading using opposite Vanguard and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, BMO Global can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BMO Global will offset losses from the drop in BMO Global's long position.| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
| BMO Global vs. BMO Short Term Bond | BMO Global vs. BMO Canadian Bank | BMO Global vs. BMO Aggregate Bond | BMO Global vs. BMO Balanced ETF |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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